Imagination Technologies Group’s PowerVR cores are used in a variety of mobile phones today — including the iPhone — that require a combination of low-power consumption and good graphics. With this deal, Apple is now expected to use PowerVR graphics in future versions of iPhones and iPods, possibly alongside the ARM-based microprocessor technology it picked up with its acquisition of PA Semi.

The investment is also interesting news for Intel, which makes Atom processors for portable devices and recently licensed the PowerVR technology. It’s probably bad news for Nvidia, which has its own ARM-based graphics solution for mobile phones. Imagination Technologies designs chips but doesn’t actually make them. It’s licensees, such as Samsung (which makes the main processing chip in the iPhone), who do the fabrication.

Clearly, future versions of the iPhone, which has a four-inch multi-touch display, will require more graphics horsepower. Part of the reason is that games have become the No. 1 application on the iPhone, accounting for thousands of the new applications on Apple’s App Store.

The iPhone and most other mobile devices use a version of Imagination’s PowerVR MBX graphics processor core.

For more on Apple’s deal with Imagination, see AppleInsider’s two-page report titled Apple’s bionic ARM to muscle advanced gaming graphics into iPhones.